Real Property and Business Litigation Report Volume X, Issue 17 May 1, 2017 Manuel Farach Santa Monica Beach Property Owners Association, Incorporated v. Acord, Case No. 1D16-4782 (Fla. 1st DCA 2017). It is the manner in which property is used, i.e., used for residential or business purposes, that determines whether a no businesses restriction is violated. Accordingly, short-term home rentals do not violate a no businesses association restriction because the use of the property is residential. The Bank Of New York Mellon v. Glenville, Case No. 2D15-5198 (Fla. 2nd DCA 2017). A claimant to surplus funds under Florida Statute section 45.031(7)(b) must file their claim within sixty (60) days of the foreclosure sale and not within sixty days of the issuance of the certificate of title; conflict certified with Straub v. Wells Fargo Bank, N.A., 182 So. 3d 878, 881 (Fla. 4th DCA 2016). Department of Transportation v. United Capital Funding Corp., Case No. 2D14-2249 (Fla. 2nd DCA 2017). Account debtors, after receiving notice of assignment of their account to a new assignee under Florida Statute section 679.4016, can only discharge their account obligations by making payments to the new assignee. Highlands-In-The-Woods, L.L.C. v. Polk County, Case No. 2D15-2801 (Fla. 2nd DCA 2017). Requiring a developer to connect to a reclaimed water system is a permissible development exaction that satisfies the Nollan/Dolan test as using reclaimed water is a legitimate state interest. American Sales and Management Organization, LLC, v. Lopez, Case No. 3D16-2329 (Fla. 3rd DCA 2017). The operating agreement of a LLC may require the LLC advance the defense costs of former management, even if it is the LLC suing former management. City of Satellite Beach v. Goersch, Case No. 5D16-2763 (Fla. 5th DCA 2017). A petitioner bears the initial burden of establishing it has met the requirements for a variance, and the burden does not shift to the government until this burden is met. 2017 Manuel Farach McGlinchey Stafford PLLC in AL, FL, LA, MS, NY, OH, TX, and DC. McGlinchey Stafford LLP in CA. Page 1 of 1 mcglinchey.com
Third District Court of Appeal State of Florida Opinion filed April 26, 2017. Not final until disposition of timely filed motion for rehearing. No. 3D16-2329 Lower Tribunal No. 14-17706 American Sales and Management Organization, LLC, d/b/a Eulen America, Appellant, vs. Luis Rodriguez Lopez, et al., Appellees. An Appeal from the Circuit Court for Miami-Dade County, John W. Thornton, Jr., Judge. Holland & Knight, LLP, Christopher N. Bellows and Joseph Mamounas, for appellant. Dorta Law and Matias R. Dorta; Dimond Kaplan & Rothstein, P.A., David A. Rothstein and Lorenz Michel Prüss; Kula & Associates, P.A., Elliot B. Kula, W. Aaron Daniel and William D. Mueller, for appellees. Before ROTHENBERG, EMAS and FERNANDEZ, JJ. FERNANDEZ, J. American Sales and Management Organization LLC, etc. ( ASMO ) appeals an Omnibus Order on appellees Luis Rodriguez Lopez s and Brent Blake s
motions for partial summary judgment, and an Order on Joint Motion to Determine Amount of Expenses that ASMO must Advance and to Establish a Going- Forward Protocol Regarding Advancement in the defense of the underlying lawsuit. We affirm because the parties Operating Agreement obligates ASMO to advance expenses. The Operating Agreement contains an advancement provision that is clear and unambiguous. Section 5.15(b) of the parties Operating Agreement requires that ASMO shall indemnify and hold harmless any person it sues by reason of the fact that such person was a manager or officer of ASMO. Section 5.15(f) requires that expenses subject to indemnification shall be paid by ASMO in advance of such proceedings final disposition. 1 ASMO sued by reason of the fact that the appellees Rodriguez and Blake served as officers and managers of ASMO. ASMO alleged in its Fourth Amended Complaint and Demand for Jury Trial that its claims arose from a multi-year scheme developed and executed by Rodriguez and Blake while they simultaneously served as ASMO s two highest-ranking officers, managers, and agents. ASMO alleged that Rodriguez and Blake breached their duties of loyalty and care in their capacity as officers and managers of ASMO. 1 Advancement, as distinct from indemnification, involves the advance payment of litigation expenses regardless of whether indemnification is later determined. 2
The trial court therefore correctly found that, pursuant to the clear and unambiguous language of the advancement provision, ASMO must advance expenses. See Andersen Windows, Inc. v. Hochberg, 997 So. 2d 1212, 1214 (Fla. 3d DCA 2008)(stating that a contract must be enforced as written when it is clear and unambiguous). Affirmed. 3
IN THE SECOND DISTRICT COURT OF APPEAL, LAKELAND, FLORIDA April 26, 2017 THE BANK OF NEW YORK MELLON, ) f/k/a THE BANK OF NEW YORK, as ) successor trustee to JPMorgan Chase ) Bank, N.A., as trustee on behalf of the ) Certificateholders of the CWHEQ, Inc., ) CWHEQ Revolving Home Equity Loan ) Trust, Series 2006-D, ) ) Appellant, ) ) v. ) Case No. 2D15-5198 ) DIANNE D. GLENVILLE, a/k/a DIANE D. ) GLENVILLE, a/k/a DIANE GLENVILLE; ) and MARK S. GLENVILLE, ) ) Appellees. ) ) BY ORDER OF THE COURT: Appellant's motion for rehearing and request for certification are granted to the extent that the prior opinion dated January 20, 2017, is withdrawn, and the attached opinion is issued in its place. The motion for rehearing en banc is denied. No further motions for rehearing will be entertained. I HEREBY CERTIFY THE FOREGOING IS A TRUE COPY OF THE ORIGINAL COURT ORDER. MARY ELIZABETH KUENZEL, CLERK
IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT THE BANK OF NEW YORK MELLON, ) f/k/a THE BANK OF NEW YORK, as ) successor trustee to JPMorgan Chase ) Bank, N.A., as trustee on behalf of the ) Certificateholders of the CWHEQ, Inc., ) CWHEQ Revolving Home Equity Loan ) Trust, Series 2006-D, ) ) Appellant, ) ) v. ) Case No. 2D15-5198 ) DIANNE D. GLENVILLE, a/k/a DIANE D. ) GLENVILLE, a/k/a DIANE GLENVILLE; ) and MARK S. GLENVILLE, ) ) Appellees. ) ) Opinion filed April 26, 2017. Appeal from the Circuit Court for Manatee County; John F. Lakin, Judge Anthony R. Smith and Kendra J. Taylor of Sirote & Permutt, P.C., Winter Park; and Shaun K. Ramey and Matthew R. Feluren of Sirote & Permutt, P.C., Fort Lauderdale, for Appellant. Sheryl A. Edwards of The Edwards Law Firm, PL, Sarasota, for Appellees. SLEET, Judge.
The Bank of New York Mellon appeals the trial court's order denying its claim for surplus funds from a foreclosure sale. 1 Because the bank's claim was untimely, we affirm. Under section 45.031(7)(b), Florida Statutes (2015), any person claiming a right to surplus funds must file a claim with the clerk of court within sixty days of the foreclosure sale. The record reflects that the underlying property was sold at public auction on July 2, 2015, and that the bank filed its claim for surplus funds as a subordinate lienholder on September 2, 2015, sixty-two days after the date the property was sold. The trial court denied the bank's claim as untimely filed. On appeal, the bank argues that a foreclosure sale is not complete until the clerk issues the certificate of sale. Because the certificate of sale in this case was issued on July 6, 2015, the bank claims that it had until September 4, 2015, to file a claim and that therefore its September 2, 2015, filing was timely. We disagree. "The interpretation of a statute is a question of law, and it is therefore subject to a de novo review." Mathews v. Branch Banking & Tr. Co., 139 So. 3d 498, 500 (Fla. 2d DCA 2014) (citing W. Fla. Reg'l Med. Ctr., Inc. v. See, 79 So. 3d 1, 8 (Fla. 2012)). "[W]hen the language of the statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious 1 Diane and Mark Glenville were the property owners and defendants in the foreclosure action. They are entitled to the surplus funds remaining with the clerk more than sixty days after the foreclosure sale pursuant to section 45.031(7)(b), Florida Statutes (2015). - 2 -
meaning." Gulf Atl. Office Props., Inc. v. Dep't of Revenue, 133 So. 3d 537, 539 (Fla. 2d DCA 2014) (quoting Hess v. Walton, 898 So. 2d 1046, 1049 (Fla. 2d DCA 2005)). This court has previously explained that "the language in section 45.031(7)(b) is clear and unambiguous: any person claiming a right to the surplus funds must file a claim with the clerk no later than sixty days after the sale." Dever v. Wells Fargo Bank Nat'l Ass'n, 147 So. 3d 1045, 1047 (Fla. 2d DCA 2014); see also Mathews, 139 So. 3d at 500 ("The language of section 45.031(7)(b) is clear and unambiguous in requiring that any person claiming a right to the surplus funds 'MUST FILE A CLAIM WITH THE CLERK NO LATER THAN 60 DAYS AFTER THE SALE.' " (emphasis omitted)). This subsection only refers to the "sale," not the "certificate of sale." 45.031(7)(b). This is significant because section 45.031 assigns particular and distinct meanings to the terms "sale" and "certificate of sale" and does not use them interchangeably. See 45.031(4) ("After a sale of the property the clerk shall promptly file a certificate of sale and serve a copy of it on each party...." (emphasis added));.031(5) ("If no objections to the sale are filed within 10 days after filing the certificate of sale, the clerk shall file a certificate of title and serve a copy of it on each party." (emphasis added)). Reading subsection (7)(b) to require a claim for surplus funds to be filed within sixty days of the certificate of sale instead of the actual sale itself would render subsection (4) meaningless and would confuse the meaning of other subsections of the statute. Additionally, such a reading would be inconsistent with this court's prior case law interpreting section 45.031(7)(b). In Mathews, this court explained that the bank "was required to file a claim with the clerk within sixty days after the sale of the - 3 -
property to preserve any claim it may have had to the surplus funds." 139 So. 3d at 500 (emphasis added). Similarly, in Dever, this court used the date the property was sold at auction, not the date the certificate of sale was issued, as the start date for the sixty-day period. 147 So. 3d at 1047. Although using either date would not have changed the fact that the banks' claims were untimely, in both cases this court interpreted the language of the statute to refer to the date of the actual sale, not the issuance of the certificate of sale. See Mathews, 139 So. 3d at 499-500; Dever, 147 So. 3d at 1047. For the first time on rehearing, the bank argues that the date of the sale should be calculated from the date of the issuance of the certificate of title. In support, it cites Straub v. Wells Fargo Bank, N.A., 182 So. 3d 878, 881 (Fla. 4th DCA 2016), which was published prior to the filing of the bank's initial brief. In Straub, the Fourth District held that "[u]nder section 45.01(1)(a), (2)(f), and (7)(b), a foreclosure 'sale' takes place when ownership of the property is transferred upon filing of the certificate of title." The bank waived this argument by failing to raise it in its appellate briefs. See Fla. R. App. P. 9.330(a) (stating that a motion for rehearing shall not include "issues not previously raised in the proceeding"); see also Teitelbaum, v. S. Fla. Water Mgmt. Dist., 176 So. 3d 998, 1005 n.3 (Fla. 3d DCA 2015) (holding that an argument raised for the first time in a motion for rehearing was waived), review denied, SC15-1994 (Fla. Mar. 16, 2016); Tillery v. Fla. Dep't of Juvenile Justice, 104 So. 3d 1253, 1255 (Fla. 1st DCA 2013) ("[A]n argument not raised in an initial brief is waived."); Philip Morris USA, Inc. v. Naugle, 103 So. 3d 944, 949 (Fla. 4th DCA 2012) ("It is a rather fundamental principle of appellate practice and procedure that matters not argued in the briefs may not be - 4 -
raised for the first time on a motion for rehearing." (quoting Ayer v. Bush, 775 So. 2d 368, 370 (Fla. 4th DCA 2000))). However, we recognize that our holding in this opinion conflicts with the Fourth District's holding in Straub. Therefore we must certify conflict. And we note that construing the term "sale" to refer to the issuance of the certificate of title confuses the meaning of several subsections of section 45.031. See, e.g., 45.031(1)(a) (requiring the trial court to "direct the clerk to sell the property at a public sale" and stating that "[a] sale may be held more than 35 days after the date of final judgment");.031(2) (requiring publication of a "[n]otice of sale" that "shall contain... [t]he time and place of sale");.031(3) (stating that "[t]he sale shall be conducted at public auction" and requiring the highest bidder to post a deposit "[a]t the time of the sale");.031(5) (requiring the clerk to file a certificate of title "[i]f no objections to the sale are filed within 10 days after filing the certificate of sale");.031(6) ("When the certificate of title is filed the sale shall stand confirmed." (emphasis added)). Because the bank filed its claim outside the statutory window, we must affirm the trial court's order denying the claim. In so doing, we note that the two cases on which the bank relies on appeal In re Jaar, 186 B.R. 148, 154 (Bankr. M.D. Fla. 1995), and Shlishey the Best, Inc. v. CitiFinancial Equity Services, Inc., 14 So. 3d 1271, 1275 (Fla. 2d DCA 2009) are inapplicable here because they both concern a mortgagor's right of redemption, which is governed by section 45.0315, not section 45.031. Affirmed, conflict certified. - 5 -
LaROSE and BADALAMENTI, JJ., Concur. - 6 -
IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED CITY OF SATELLITE BEACH, Petitioner, v. Case No. 5D16-2763 KLAUS GOERSCH AND BRIGITTE GOERSCH, Respondents. / Opinion filed April 28, 2017 Petition for Certiorari Review of Order from the Circuit Court for Brevard County, Lisa Davidson, Judge. James P. Beadle, of Spira, Beadle & McGarrell, P.A., Palm Bay, for Petitioner. Clifford Repperger, Jr., and Tiffany M. Walters, of GrayRobinson, P.A, Melbourne, for Respondents. PALMER, J. The City of Satellite Beach (the City) seeks second-tier certiorari review of the circuit court's order quashing the Board of Adjustment's denial of the Respondents', Klaus and Brigitte Goersches', request for a fence variance. Because the circuit court failed to apply the correct law, we grant the petition.
The Goersches purchased a home in Satellite Beach in 2012. At that time, the property contained an opaque fence which was installed in 2006. The fence became nonconforming in August 2007 as a result of an amendment to the Satellite Beach Code of Ordinances (the Code). The amendment reads: A fence shall not have more than 30 percent of any vertical surface per running foot constructed of opaque materials. The Goersches applied for a permit to extend their existing fence. The permit was issued, and the fence was installed. However, the building inspector refused to issue a certificate of completion for the fence because it violated the opaqueness amendment. The Goersches sought a variance from the Code to allow the now-completed, noncompliant fence to remain in place. Section 30-205(b) of the Code authorizes the Board of Adjustment to hear and decide applications for fence variances. This section provides:.... Powers and Duties (3) Criteria. The board shall be governed by the following criteria when deciding whether a variance shall be granted: a. Written application. A written application for a variance must be submitted demonstrating the following criteria, all of which must be met: 1. A special circumstance exists which is peculiar to the land, building, or structure involved (i.e., not applicable to other lands or structures in the same zoning district), and is not the result of the applicant's actions except as provided in (b)(3)b.3 (i) and (ii) of this section;... 3. Literal interpretation of the provisions of this chapter would deprive the applicant of rights commonly enjoyed by other properties in the same zoning district and work unnecessary hardship on the applicant; and 4. Applicant's reason justifies granting the variance, and the variance is the minimum that will make possible the 2
reasonable use of the land, building, or structure under present zoning; and 5. The variance will be in harmony with the general intent of this chapter and the district in which the property is located and will not be detrimental to the neighborhood or the public welfare. Id. The Goersches' application included the criteria required for a variance and asserted two special circumstances peculiar to their property: 1) the opaque existing fence was situated on the property when the Goersches purchased the property, and 2) the cityowned property immediately adjacent to the subject property was recently officially dedicated as a city park. The Board of Adjustment conducted a variance hearing. Ultimately, the Board entered an order denying the Goersches' variance application. The Goersches then sought certiorari review in the circuit court. They argued that the Board's order denying their variance application was not supported by substantial competent evidence. The circuit court agreed and granted the certiorari petition, quashing the decision of the Board and remanding the matter to the Board. The circuit court concluded: The only objective complaint raised by the neighbors' written comments was that the fence would be a potential hazard in the event of a hurricane or high winds. Although off-point and not addressed to the opaque nature of the fence, the Petitioners indicated that the City's breezeway requirement would be met. The remaining comments made by surrounding property owners amounted to disagreements with the contents of the Petitioners' application and complaints that the fence would obstruct the view of the ocean from the street and neighboring properties. The staff member that was present did not address any of the factors to be weighed regarding the issuance of a variance. Generalized opinions and complaints, without more, do not constitute competent, substantial evidence. Because the Board's denial was not supported by 3
competent, substantial evidence, the Petitioners' application for a variance should be granted. Thereafter, the City filed the instant petition for a writ of certiorari arguing that the circuit court erred by improperly shifting the burden of proof. We agree. Florida courts are authorized to use the common law writ of certiorari to review the actions of local government agencies not reviewable under Florida's Administrative Procedure Act. Broward Cty v. G.B.V. Int'l., Ltd., 787 So. 2d 838, 843 (Fla. 2001). When a petitioner seeks review of a quasi-judicial action, the circuit court conducts what is known as first-tier certiorari review. Id. The circuit court's review is confined to: [1] whether procedural due process is accorded, [2] whether the essential requirements of the law have been observed, and [3] whether the administrative findings and judgment are supported by competent substantial evidence. Id. When a party seeks certiorari review of the circuit court s order, the district court conducts what is known as second tier review and determines [1] whether the circuit court afforded procedural due process and [2] applied the correct law. Id. Neither party claims that it was denied procedural due process; hence, the only issue before this court is whether the circuit court applied the correct law. "[A] circuit court applies the 'wrong' or 'incorrect' law when it reweighs or reevaluates conflicting evidence and decides the merits of the underlying dispute anew." State, Dep't of Highway Safety & Motor Vehicles v. Wiggins, 151 So. 3d 457, 463 (Fla. 1st DCA 2014). The circuit court cannot reweigh the evidence and substitute its judgment for that of the Board. Haines City Cmty. Dev. v. Heggs, 658 So. 2d 523, 530 (Fla. 1995). For a variance request, the applicant carries the burden to establish that the criteria necessary to grant the request is met. Bd. of Cty. Cmm'rs of Dade Cty. v. First Free Will 4
Baptist Church, 374 So. 2d 1055 (Fla. 3d DCA 1979). The Board concluded that the Goersches did not meet that burden, and the record supports this conclusion. Since the Goersches never met their burden, the burden did not shift to the City to show that there was substantial competent evidence to support the Board's denial of the variance request. Accordingly, the circuit court failed to apply the correct law by shifting the burden to the City to show that the Board's denial was supported by substantial competent evidence. Accordingly, we grant the petition, quash the circuit's order, and remand for further proceedings. Petition GRANTED; Circuit Court Order QUASHED; Cause REMANDED. EDWARDS, J. and JACOBUS, B.W., Senior Judge, concur. 5
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED IN THE DISTRICT COURT OF APPEAL OF FLORIDA SECOND DISTRICT DEPARTMENT OF TRANSPORTATION, ) ) Appellant, ) ) v. ) Case No. 2D14-2249 ) UNITED CAPITAL FUNDING CORP., ) ) Appellee. ) ) Opinion filed April 28, 2017. Appeal from the Circuit Court for Pinellas County; Jack Day, Judge. Theodore A. Avellone and Marc Peoples, Assistant General Counsels, Department of Transportation, Tallahassee, for Appellant. Michael Ullman of Ullman & Ullman, P.A., Boca Raton, for Appellee. Lisa Paige Glass of Glass Law Office, P.A., Boca Raton, for Amicus Curiae, International Factoring Association. SALARIO, Judge. The Florida Department of Transportation appeals from a final summary judgment declaring it legally obligated to United Capital Funding Corp. for the payment
of certain accounts receivable that had been assigned to United Capital by one of the Department's vendors, Arbor One, Inc. The appeal centers on a provision of Article 9 of the Uniform Commercial Code codified at section 679.4061, Florida Statutes (2012) stating that, after receiving notice of an assignment, the debtor on an account receivable can discharge its contractual obligation to pay the account only by making payment to the assignee and not the assignor. The Department was originally under a contractual obligation to pay Arbor One for services Arbor One provided. Arbor One sold its right to be paid for those services to United Capital, but the Department continued to pay Arbor One despite having received notice of that sale. The issues in this case are (1) whether the statute governs when a government agency is the account debtor and, if so, (2) whether sovereign immunity bars a suit against the government agency by an assignee when the agency improperly pays the assignor instead of the assignee. 1 We answer the first question in the affirmative and the second question in the negative. As a result, we conclude that once Arbor One's accounts receivable were sold, the Department could discharge its contractual obligation to pay for those services only by paying United Capital as required by section 679.4061 and that sovereign immunity does not bar United Capital's suit against the Department to enforce its contractual obligation to pay. We therefore affirm the summary judgment in favor of United Capital. 1 The Department also asserts that the trial court erred by denying its motion to transfer venue, denying its motion to dismiss in favor of arbitration, and in granting summary judgment because United Capital had not complied with conditions precedent to suit. Without further comment, we find no merit in these issues. - 2 -
I. A. The case involves the business of factoring. Factoring is a financial arrangement through which a business can obtain immediate funding from a third party by using its accounts receivable sums owed to the business by its customers, usually on invoices for goods sold or services provided as consideration. In a factoring arrangement, the business sells its accounts receivable to a third party, called a factor, at a discount from their face value. The factor takes ownership of the accounts receivable and, as a consequence, takes the sole right to receive the entirety of payments previously owed to the business. Ordinarily, the factor notifies the debtor on the sold accounts of the change in ownership and thereafter receives payments directly from the account debtor. Factoring relationships implicate Article 9 of the UCC because Article 9 applies to the sale of accounts, including accounts receivable. 679.1091(1)(c). In that connection, section 679.4061 defines the rights and obligations of the business that originates and sells the accounts receivable, the debtors on the accounts, and the third parties to whom the accounts are sold. As applied to a factoring arrangement, the statute provides that an account debtor makes payments to the business originating the account until such time as it is notified by either the business or the factor that the account has been assigned to the factor. 679.4061(1). Once that notification is given, an account debtor must make all further payments to the factor, subject to a right of the account debtor to demand proof from the business or the factor that the account has in fact been assigned. 679.4061(1), (3). The statute also provides that any term in an - 3 -
agreement between the business originating the accounts and its debtors that prohibits or restricts the assignment of the accounts is ineffective. 679.4061(4)(a). One effect of the statute is to place an account debtor at risk if, after it receives notice of the assignment, it continues to pay the business that originated the account instead of the factor who bought the right to be paid under it. The statute provides that a payment made to the business after notice has been given does "not discharge the obligation" owed by the account debtor on the account. 679.4061(1). An account debtor who continues to pay the business that originated the account after receiving notice that the account has been assigned can be held liable to the factor for the full amount of the account notwithstanding its payment of that same amount to the business. See Bldg. Materials Corp. of Am. v. Presidential Fin. Corp., 972 So. 2d 1090, 1092 (Fla. 2d DCA 2008) ("[A] debtor who receives actual notice of the assignment of an account receivable... may be held liable to the assignee if the debtor later pays the assigned debt to the assignor rather than the assignee."). This is sometimes referred to as a risk of double payment. B. The Department entered into several contracts with Arbor One, pursuant to which Arbor One provided it with roadside maintenance services and the Department agreed to pay Arbor One for services rendered. The Department became, in UCC terms, an account debtor with an obligation to pay Arbor One. Arbor One later entered into a factoring arrangement with United Capital. Under that arrangement, Arbor One assigned the accounts receivable generated under its contract with the Department to - 4 -
United Capital, making Arbor One the assignor of those accounts and United Capital the assignee. United Capital notified the Department of the assignments in writing. The written notifications described the arrangement between Arbor One and United Capital, explained that Arbor One had assigned its accounts receivable to United Capital, stated that all future payments should be made to United Capital, and stated that payment to any other party would not discharge the Department's obligations on the accounts. Although it received the notices, the Department nonetheless continued to pay Arbor One and refused to pay United Capital. In response, United Capital filed this declaratory judgment action against the Department seeking to enforce its rights to payment of the accounts receivable that Arbor One assigned to it, which in its view was required by section 679.4061(1). It later filed a motion for summary judgment that, as relevant here, the Department opposed on two principal grounds. First, the Department argued that section 679.4061(1) does not apply where, as here, a government agency is the account debtor on assigned accounts receivable. Second, the Department argued that it was entitled to sovereign immunity because the Department had not originally contracted with United Capital and had not otherwise agreed to make contract payments to it. The trial court rejected the Department's arguments, granted United Capital's motion for summary judgment, and entered a final judgment in United Capital's favor. The Department timely appealed. - 5 -
II. In this case, there is no dispute as to any of the salient facts. The trial court's determinations that the Department was obligated under section 679.4061(1) to make payments directly to United Capital and that sovereign immunity did not bar United Capital's claims against the Department resolved pure questions of law. Our review is de novo. See Shaw v. Tampa Elec. Co., 949 So. 2d 1066, 1069 (Fla. 2d DCA 2007); Allstate Ins. Co. v. Regar, 942 So. 2d 969, 971 (Fla. 2d DCA 2006). A. We first consider whether section 679.4061(1) applies when a government body like the Department stands in the role of account debtor. We hold that it does. Section 679.4061 is titled "Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective." Overall, the statute provides for free alienability of accounts, chattel paper, and payment intangibles by invalidating certain contractual and legal restrictions on their sale and specifies the rights and obligations of the parties when a sale of such assets occurs. 679.4061(1), (4), (6). As concerns the rights and obligations of the parties, subsection (1) of section 679.4061 provides as follows: [A]n account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor. - 6 -
If the statute governs here, the Department, as an account debtor on the accounts receivable Arbor One assigned to United Capital, could discharge its contractual obligation to pay those accounts receivable only by paying United Capital as the assignee, and its failure to do so would subject the Department to liability to United Capital. 2 On the face of it, there is no question that section 679.4061(1) is by its terms operative on these facts because there is no question that the statutory term "account debtor" which identifies the category of persons obligated to make payment to an assignee of accounts receivable reaches government agencies like the Department. Article 9 of the UCC defines "account debtor" as "a person obligated on an account, chattel paper, or general intangible." 679.1021(1)(c). The general definitions section of the UCC, in turn, defines "person" to include a "government" or "governmental subdivision, agency, or instrumentality" unless the context in which it is used indicates otherwise. 671.201(30), Fla. Stat. (2012). We see nothing in sections 679.1021(c) or 679.4061(1) to indicate that the terms "account debtor" and "person" do not mean what the definitions say they mean. As such, we give the term "account debtor" the meaning the legislature gave it. See Nicholson v. State, 600 So. 2d 1101, 1103 (Fla. 1992). That meaning includes the Department, which renders 679.4061(1) 2 We note that even if section 679.4061(1) does not govern the manner in which the Department discharges its payment obligation after an assignment, it is quite possible that ordinary contract law would command the same result. See generally Restatement (Second) of Contracts, 338(1) (Am. Law Inst. 1977). Although the briefs allude to this possibility, the argument was not developed either in the trial court or here. Accordingly, we decline to address it. - 7 -
operative as to the Department's discharge of its obligation on assigned accounts receivable. The Department argues, however, that another provision of Article 9 places governmental account debtors outside the reach of that statute. It points to section 679.1091, titled "Scope," and in particular to subsection (4)(n), which states that "[t]his chapter does not apply to... [a]ny transfer by a government or governmental unit." It asserts that because its payments on the accounts receivable at issue involve transfers of money by a governmental unit, the so-called government-transfer exception in section 679.1091(4)(n) prevents section 679.4061(1) from regulating how it may discharge its contractual obligation to make payment for the services Arbor One rendered to it. If the provisions of section 679.4061(1) could be read to "apply to" a "transfer" by a governmental unit where the governmental unit is merely an account debtor making a payment to the assignee of an account receivable rather than the assignor of that account, then the Department's argument here would be correct. But, as we explain, the plain language of section 679.1091 excludes this construction. 3 The only published decision to address this question is MP Star Financial, Inc. v. Cleveland State University, 837 N.E.2d 758 (Ohio 2005), which held that Ohio's analog to section 679.4061(1) does not apply to governmental account debtors. In MP Star, a vendor to a state university sold its accounts receivable to a factor. Although the factor provided notice of the assignment to the university, the university continued 3 United Capital does not dispute, and we agree, that the Department is a "governmental unit" within the meaning of section 679.1091(4)(n). See 679.1021(1)(ss) (defining "governmental unit" to include "a department... of... a state"). - 8 -
paying the original vendor. The factor sued the university asserting that Ohio's codification of Article 9's provision governing discharge upon assignment identical to Florida's required that the university pay it rather than the vendor. The university moved to dismiss on the grounds that Ohio's codification of the government-transfer exception also identical to Florida's precluded the factor's claim. The trial court dismissed the action, and the intermediate appellate court affirmed. Id. at 760. The Ohio Supreme Court also affirmed in favor of the university based on its interpretation of the term "transfer." Id. at 762. It noted that the statute did not define "transfer" and reasoned that it must therefore give that term its "common, everyday meaning." Id. at 761. It consulted two dictionaries, which variously defined "transfer" as "[t]he conveyance or removal of something" from one person to another and "[a]ny mode of disposing of or parting with an asset..., including the payment of money." Id. (alterations in original). Applying those definitions, the court held that the government's payment on an account receivable involves a transfer of money and was thus outside the scope of Ohio's analog to section 679.4061(1). Id. Unsurprisingly, the Department argues that MP Star got it right, while United Capital says the opposite. Although we agree with MP Star on the basic principles of statutory interpretation that resolve the case that we apply unambiguous statutory language as written, see Holly v. Auld, 450 So. 2d 217, 219 (Fla. 1984), and give undefined statutory terms their common, everyday meaning, see Am. Heritage Window Fashions, LLC v. Dep't of Revenue, 191 So. 3d 516, 520 (Fla. 2d DCA 2016) we disagree that these principles lead to the conclusion that section 679.4061(1) is inoperative in circumstances where a governmental unit is merely the account debtor. - 9 -
We think that MP Star's interpretation of the statute is incomplete. It construed only one word in the government-transfer exception it held that the word "transfer" includes a payment of money without regard to the remaining text of that section. See Am. Heritage Window Fashions, LLC, 191 So. 3d at 521 (stating that statutory provisions must be construed as a whole). By its express terms, however, the government-transfer exception is implicated only in circumstances where Article 9 otherwise applies to a transfer by the government. 679.1091(4)(n) ("This chapter does not apply to... [a]ny transfer by... a governmental unit." (emphasis added)). That requires that we determine whether holding that section 679.4061(1)'s provisions regulating discharge of an obligation upon assignment of an account receivable are operative as against a governmental account debtor is to apply Article 9 to a government transfer. MP Star neither asked nor answered that question. In everyday usage, section 679.1091(4)(n)'s provision that "[t]his chapter does not apply to... [a]ny transfer... by a governmental unit" is understood this way: "[t]his chapter" is the subject of the sentence; "does not apply" is the predicate verb phrase; and the noun phrase "[a]ny transfer... by a governmental unit" is the object of that predicate. See Mark Lester & Larry Beason, The McGraw Hill Handbook of English Grammar and Usage, 33 (2d ed. 2013). "This chapter" clearly encompasses all of section 679.4061(1). "[D]oes not apply to" then clearly restricts applying section 679.4061 to government transfers that would otherwise be included. We are left with addressing whether an account debtor's payments on accounts receivable in accord with section 679.4061 are transfers to which Article 9 is being applied. Put differently, - 10 -
the question is whether an account debtor's payments on accounts receivable are objects of section 679.4061. The text of section 679.1091 the statute that defines the scope of Article 9 and of which the government-transfer exception is a part makes clear that the answer to that question is no. Section 679.1091(1) defines the scope of Article 9 i.e., it defines the things to which Article 9 applies. As relevant here, that subsection states that "[t]his chapter applies to... a sale of accounts, chattel paper, payment intangibles, or promissory notes." 679.1091(1)(c) (emphasis added). Although the statute unambiguously says that it applies to sales of accounts like Arbor One's sale of accounts receivable to United Capital, it does not say that Article 9 applies to money or transactions in money as such, like the Department's transfer of money to discharge its contractual obligation on an account. In other words, the plain terms of section 679.1091(1) establish that Article 9 does not apply as an initial matter to the transfer of money involved when an account debtor pays on an account receivable in order to discharge its contractual obligation to make that payment. Because transfers of money to pay accounts receivable are not within the defined scope of Article 9 i.e., are not something to which Article 9 applies the government-transfer exception cannot be deemed to exclude that transfer from a scope of operation to which it never belonged. Section 679.1091(1) states that the items it lists are within the scope of Article 9 "except as otherwise provided in subsections (3) and (4)." (Emphasis added.) That necessarily means that the exceptions stated in section 679.1091(4), which include the government-transfer exception, are items to which Article 9 would have applied had the legislature not removed them from its scope. - 11 -
Transfers of money to make payment on an account, chattel paper, or payment intangible as distinguished from the sales of such assets themselves are not something to which Article 9 applies as an initial matter. See 679.1091(1). As a result, we can only interpret section 679.4061(1)'s regulation of an account debtor's obligations upon assignment of an account, chattel paper, or payment intangible as applying to the transfer of the asset itself (here, the sale of the accounts receivable by Arbor One to United Capital), which is within the scope of Article 9, and not as applying to the transfer of money involved in discharging the account debtor's contractual obligation to make payments on that account, chattel paper, or payment intangible (here, the Department's payments on accounts receivable), which is not. This interpretation is confirmed by the text of section 679.4061, which governs sales of accounts, chattel paper, and payment intangibles and contains the discharge-upon-assignment provision to which the Department objects. Section 679.4061 invalidates restrictions on sales of those assets, specifies the various parties involved in such sales, and defines their rights and obligations vis-à-vis each other. As implicated here, it identifies the person to whom an account debtor owes performance both before and after the sale and directs performance to that person in order for the account debtor's obligation to be discharged. 679.4061(1) ("After receipt of the notification, the account debtor may discharge its obligation...."). To be sure, the manner in which an account debtor discharges its obligation is by paying the money it owes on the account, chattel paper, or payment intangible, which MP Star regards as a type of transfer. But defining a transfer to include a payment does not mean that the payment is the transfer to which the statute applies. On the contrary, the statutory text - 12 -
shows that the transfer to which the statute applies the transfer that is the object of the statute is a transfer of accounts, chattel paper, or payment intangibles, not a transfer of money as payment to satisfy an account debtor's obligation on one of those items. In sum, then, the government-transfer exception created by section 679.1091(4)(n), by its own terms, is not implicated by the mere fact that the government happens to be an account debtor required to make a payment on an account, chattel paper, or payment intangible that has been assigned. If a government actor sold such assets, that would be a different story. Article 9 generally applies to such sales, and the sale of an account, chattel paper, or payment intangible by a governmental body would be a transfer of that asset, which would be a transfer by a governmental unit within the meaning of section 679.1091(4)(n). That circumstance, however, is not what the facts of this case present. Here, the accounts receivable were sold by Arbor One to United Capital, and the Department, as the governmental account debtor, was owed notice of the sale under the statute for the purpose of sending the same payments it always owed. The text of section 679.4061 shows that its object the thing it applies to is the assignment of accounts, chattel paper, and payment intangibles. In this case, that occurred through a sale of accounts receivable by a nongovernmental entity, not the payment on those accounts by a governmental one. B. The Department contends that even if it is governed by section 679.4061(1), sovereign immunity affords it a complete defense to United Capital's claims. It argues that sovereign immunity prevents it from becoming obligated to pay United Capital, notwithstanding Arbor One's assignment of accounts to United Capital, - 13 -
because it never entered into a contract with United Capital. We disagree and hold that the Department, having entered into a contract with Arbor One, was bound by the rules governing assignment of Arbor One's express contract rights in the same way that any other contracting party would have been bound. Sovereign immunity affords the government a privilege not to be sued without its consent. See City of Ft. Lauderdale v. Israel, 178 So. 3d 444, 446 (Fla. 4th DCA 2015). Our constitution allows the legislature to waive that immunity by general law. Art. 10, 13, Fla. Const. Here, the legislature has by general law waived the Department's immunity on contract claims: Suits at law and in equity may be brought and maintained by and against the department on any contract claim arising from breach of an express provision or an implied covenant of a written agreement.... In any such suit, the department and the contractor shall have all of the same rights and obligations as a private person under a like contract.... 337.19(1), Fla. Stat. (2012). The question is whether a claim by an assignee of contractual accounts receivable here, United Capital based on the Department's failure to pay as required by the contract falls outside of this waiver. We think that it does not. The supreme court discussed the doctrinal basis for sovereign immunity waivers in contract cases in Pan-Am Tobacco Corp. v. Department of Corrections, 471 So. 2d 4 (Fla. 1984). There, a vendor to the Department of Corrections (DOC) sued for breach of contract, seeking lost profits as damages. The trial court granted summary judgment to DOC based on sovereign immunity, holding that the legislature had not adopted a statute authorizing contract suits against it. The First District affirmed and - 14 -
certified a question as to whether sovereign immunity bars a claim for breach of contract by a private vendor who has suffered lost profits against a state agency. Id. at 5. The supreme court answered that question in the negative and quashed the First District's decision. Id. It reasoned that although the legislature had not explicitly waived sovereign immunity for contract claims against DOC, it had by general law both empowered it to enter into contracts and also authorized certain activities that required it to have the power to contract. Id. It explained that if sovereign immunity barred a contract claim against DOC, the contracts it entered would be invalid and unenforceable in circumstances where the legislature, by authorizing DOC to enter into those contracts, plainly contemplated that the contracts should be valid and enforceable. Id. The court thus held that "where the state has entered into a contract fairly authorized by... general law, the defense of sovereign immunity will not protect the state from action arising from the state's breach of the contract." Id. A necessary implication of Pan-Am's sovereign immunity analysis is that, unless the legislature has specified that different standards apply, the government's obligations under the terms of an express written contract it was authorized by law to enter are subject to the same standards of contract performance and enforcement that would apply to a private party. See also Chiles v. United Faculty of Fla., 615 So. 2d 671, 679 (Fla. 1993) (Shaw, J., concurring in part and dissenting in part) ("Once the State enters the arena of formal contracts, it waives any right to special treatment when it reneges on its promises."). Pan-Am hinges on the notion that when the legislature authorizes the government to make a contract, it intends for the contract to be performed and for nonperformance to be enforceable in a civil action against the - 15 -
government. 471 So. 2d at 5. An established body of common law and statutory rules governing contracts serves that function. Without that law or a legislative alternative to it, the performance and enforcement of contracts to which the government is a party would at best be indeterminate and thus contrary to the statutory authorization allowing the government to make contracts in the first place. As such, where the government has entered into an express written contract that it is statutorily authorized to enter, sovereign immunity cannot protect it from the same contract rules that govern the performance of the express written contract obligations of a private party to a contract. Since Pan-Am, Florida courts have regularly considered sovereign immunity defenses in contract suits consistent with the notion that the government is subject to the same terms of contract performance and enforcement as a private party. For example, the supreme court has recognized that, like a private party, the government can be held liable for its breach of covenants that are implied by law into "[v]irtually every contract." Cty. of Brevard v. Miorelli Eng'g, Inc., 703 So. 2d 1049, 1050 (Fla. 1997) (quoting Champagne-Webber, Inc. v. City of Fort Lauderdale, 519 So. 2d 696, 697-98 (Fla. 4th DCA 1988)). It has also held that the government is liable for prejudgment interest in a breach of contract action in the same way that a private party is. Broward Cty. v. Finlayson, 555 So. 2d 1211, 1213 (Fla. 1990). And, most relevant to the facts of this case, in Kohl v. Blue Cross & Blue Shield of Florida, 988 So. 2d 654, 659 (Fla. 4th DCA 2008), the Fourth District relied on Pan-Am to hold that sovereign immunity did not protect the State from a contract claim based on allegations that a state-run health insurer continued paying medical benefits directly to patients after being - 16 -
informed that the patients had assigned their contractual rights to those payments to the doctor who had provided the medical services to them. The same result applies in this case. Section 679.4061(1)'s provision governing discharge upon assignment establishes a rule of contract performance: it determines how a party to a contract may discharge an obligation to make payment on an account created by virtue of that contract i.e., how it can perform its contractual obligation to pay after the party has been notified the account has been assigned. Cf. Bldg. Materials Corp., 972 So. 2d at 1092 (applying section 679.4061(1) in the context of a claim for breach of contract). The Department all but concedes that this rule would govern in a contract dispute between private parties. For the reasons we have explained, the rule governs here as well. See also Mooney v. Univ. Sys. of Md., 943 A.2d 108, 110-12 (Md. Ct. App. 2008) (holding that sovereign immunity did not protect state agency from liability based on failure to pay assignee of contractual account receivable), reversed on other grounds, 966 A.2d 418 (Md. 2009). The Department relies on cases like Israel, 178 So. 3d 444, and City of Orlando v. West Orange Country Club, Inc., 9 So. 3d 1268 (Fla. 5th DCA 2009), to argue that sovereign immunity prevents it from having to pay United Capital. 4 Those cases are inapposite. In each case the Department cites, a party sought to compel a government agency to perform an obligation that was not stated in an express written contract. Since Pan-Am and, as applicable here, section 337.19(1) waive sovereign 4 The Department also notes that its contract with Arbor One contained an antiassignment clause. The clause appears to be contained in certain standard contract specifications developed by the Department. We agree with United Capital that the Department on our record fails to establish that these standard specifications applied to its roadside maintenance contracts with Arbor One. - 17 -